Tobacco Stocks Ready to Burn Out

Normally among the stars in a defensive market, tobacco shares have turned in weak performances, suggesting the group may be headed for a fall.

Stocks of tobacco companies normally perform better than the broader market when investors are nervous, so the approach of the fiscal cliff should pushed investors to favor these stocks. Along with food and medicine sales, those of tobacco tend to remain steady, while television and automobile sales are easily put off until a later date.

So when the Dow Jones US tobacco index gives back its entire November-December rally while the Dow Jones Industrial Average gives back only half, something is not quite right. Tobacco as a...